Cormedix Inc. — Q1 2019 Form 10-Q
Reporting period: Three months ended March 31, 2019. CorMedix is a development-stage biopharmaceutical company focused primarily on Neutrolin, a catheter-lock solution intended to prevent catheter-related infections and thrombosis. The financial statements are unaudited.
Financial results and liquidity
| Metric | Q1 2019 | Q1 2018 / comparison |
|---|---|---|
| Revenue | $164,000 | $23,000; up $141,000, primarily from higher Middle East sales |
| Cost of sales / gross loss | $227,000 / $63,000 loss | $29,000 / $5,000 loss |
| Research and development | $2.875 million | $8.280 million; down 65%, mainly as LOCK-IT-100 wound down |
| Selling, general and administrative | $1.985 million | $1.903 million; up 4% |
| Operating loss | $4.923 million | $10.189 million |
| Net loss | $5.168 million; $0.22 per share | $10.185 million; $0.68 per share |
| Operating cash used | $7.367 million | $7.054 million |
| Cash and cash equivalents | $18.257 million at March 31 | $17.624 million at December 31, 2018 |
| Short-term investments | $7.945 million at March 31 | None reported at December 31, 2018 |
Cash, cash equivalents and short-term investments totaled approximately $26.2 million at quarter-end, excluding $172,000 of restricted cash. Financing provided $15.968 million in net cash, principally from $15.235 million of ATM stock sales, plus warrant and option exercises. The company reported $5.168 million of net loss and $7.367 million of cash used in operations; cash use reflected, among other items, reductions in accounts payable and accrued expenses.
Total liabilities were $10.766 million, including a related-party convertible note with a $6.427 million net carrying amount. The note was issued for $7.5 million principal, bears 10% annual interest compounded quarterly, is secured by company assets and matures December 30, 2021. Stockholders’ equity was $16.542 million; common shares outstanding rose to 23.812 million from 21.775 million at year-end, largely reflecting ATM issuance. A 1-for-5 reverse stock split took effect March 26, 2019; reported share and per-share figures reflect the split.
Material changes and operating developments
- Net loss declined by about 49% year over year, principally because R&D spending fell as the LOCK-IT-100 Phase 3 study moved into closeout. SG&A increased modestly.
- Interest expense increased to $302,000 from $2,000, mainly due to the December 2018 convertible-note financing, including noncash interest and debt-discount amortization.
- Revenue remained small relative to operating costs, and cost of sales exceeded sales in the quarter. The company attributed higher cost of sales partly to expired raw-material write-offs, replacement product and Middle East resale costs.
- In April 2019, after quarter-end, CorMedix received $5.1 million in net proceeds from selling unused New Jersey net operating losses.
Outlook, risks and contingencies
- LOCK-IT-100 was stopped early after an interim analysis met the prespecified efficacy threshold; the DSMB reported no safety concerns. Full-data statistical analyses were ongoing after the data were locked and unblinded in late January 2019.
- CorMedix was discussing with the FDA whether the study could support an NDA submission, including potential consideration under the Limited Population Pathway for Antibacterial and Antifungal Drugs. The company cautioned that the FDA may require a second Phase 3 trial; no assurance of the regulatory path or approval is provided.
- Management estimated that available cash and cash equivalents at March 31, together with the April NOL-sale proceeds, would fund operations into the third quarter of 2020. The company expects continuing operating cash deficits and may need additional capital. Financing may be unavailable or dilutive; management reported approximately $4.6 million remaining under its ATM and $30.3 million available under its shelf registration.
- Important execution risks include regulatory approval, clinical and manufacturing requirements, commercial uptake and competition. CorMedix also noted that it does not expect significant product revenue in the foreseeable future.
- German intellectual-property disputes with TauroPharm remain unresolved. The EPO opposition panel had indicated the European patent would be invalidated; CorMedix appealed. A separate unfair-competition complaint was dismissed in December 2018, and CorMedix appealed; an oral hearing was scheduled for September 6, 2019. The filing says outcomes cannot be predicted.
- The company has an accumulated deficit of $184.2 million. Its ability to continue planned development depends on raising capital or securing strategic arrangements, with no assurance of availability on acceptable terms.
Most important facts for investors to verify
- FDA feedback on whether LOCK-IT-100 can support an NDA or whether another Phase 3 trial will be required, and the timing and outcome of the full-data analyses.
- Cash burn, remaining runway and financing needs against management’s estimate of funding into Q3 2020, including the effect of any further ATM or shelf issuance.
- Convertible-note terms and exposure: $7.5 million principal, 10% interest, asset security, conversion at $7.50 per share and potential dilution.
- Whether Neutrolin sales can grow profitably: Q1 revenue was $164,000 while cost of sales was $227,000.
- Developments in the TauroPharm patent and unfair-competition appeals, and any resulting legal costs or effects on commercial rights.